Download Lesson 24 - Understanding Economics in US History

LESSON 24 INDUSTRIAL ENTREPRENEURS
OR
ROBBER BARONS?
VISUAL 24.1
TRAITS
OF
ENTREPRENEURS
Economically speaking, an entrepreneur is a productive resource — a
special sort of human resource.
Entrepreneurs have several characteristics:
• They organize resources and manage them in innovative ways to
increase output or produce new goods and services — or both.
• They look for new ways to produce goods and services.
• They are willing to take risks. Seeking success, they risk failure.
• They are willing to face stiff competition.
• They are willing to take advantage of legal ways to limit the competition they face — by using patents and copyrights, for example.
• They take steps to earn as much profit as possible.
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FOCUS: UNDERSTANDING ECONOMICS
IN
UNITED STATES HISTORY ©NATIONAL COUNCIL
ON
ECONOMIC EDUCATION, NEW YORK, NY
INDUSTRIAL ENTREPRENEURS
OR
ROBBER BARONS? LESSON 24
VISUAL 24.2
ENTREPRENEURSHIP DURING
LATE NINETEENTH CENTURY
Entrepreneurial
Activity (Causes)
Mass production
THE
Definition
Involves the production of large
quantities of similar goods using
large-scale operations, especially
mass production in factories employing many workers. Examples include
breakthroughs in producing steel,
clothing, shoes, cans and so forth.
Division of labor and
specialization
Laborers (productive resources) can
usually produce more goods and services per hour if their work tasks are
divided among different workers. This
is division of labor. Division of labor
allows laborers working repetitively
on the same tasks to specialize in the
production process. As time passes
and laborers become skilled at specific tasks, output rises and labor costs
fall.
Vertical integration
Vertical integration occurs when
firms manufacturing goods or providing resources along the same production chain merge. Gustavus Swift in
meat packing and Andrew Carnegie
in steel are among those who used
vertical integration.
Horizontal integration
Horizontal integration occurs when
business competitors in the same
industry merge; it occurs when a
company in one sector of an industry
acquires or gains control over other
companies in that sector. For example, a production company may
expand by purchasing other production firms. John D. Rockefeller is the
best example an industrialist who
used horizontal mergers.
FOCUS: UNDERSTANDING ECONOMICS
IN
Effects
• More output can be achieved at a
lower cost.
Supply increases.
• The number of people employed
increases because the demand for
labor rises.
• Improves efficiency: output per
labor hour rises.
Supply increases.
• Production costs fall.
Supply increases.
• Vertically integrated firms may
restrict output and increase prices.
Supply decreases.
• Production costs fall if economies of
scale are realized.
Supply increases.
• Horizontally integrated firms may
restrict output and increase prices.
Supply decreases.
UNITED STATES HISTORY ©NATIONAL COUNCIL
ON
ECONOMIC EDUCATION, NEW YORK, NY
277
LESSON 24 INDUSTRIAL ENTREPRENEURS
OR
ROBBER BARONS?
VISUAL 24.3
MASS PRODUCTION AND NEW TECHNIQUES:
CHANGE IN SUPPLY
S1
PRICE
S2
P1
P2
D
Q1
Q2
OUTPUT
278
FOCUS: UNDERSTANDING ECONOMICS
IN
UNITED STATES HISTORY ©NATIONAL COUNCIL
ON
ECONOMIC EDUCATION, NEW YORK, NY